Really progressive insurance: MetroMile wants drivers to pay per mile

By Richard Nieva , written on December 5, 2012

From The News Desk

If I were on the show “Portlandia,” what kind of car insurance would I have? Answer: Probably MetroMile.

An insurance company is likely not the first thing you think of when someone mentions the hipster capitol of the Pacific North West, but MetroMile thinks its service is tailor-made for the city and its bike-riding, climate-conscious urbanites, says Steve Pretre, the company’s cofounder and chief executive.

The company – though based in Redwood City, Calif. – today launched an alternative to the traditional insurance policy in the state of Oregon: pay per mile, plus a small base fee. The rate changes depending on a customer’s driving history and the value of the car, but most will pay between three to six cents a mile for $30 to $60 a month. The company tracks miles with a device called the Metronome, which plugs into a car’s onboard diagnostics switch, a standard feature on all cars manufactured after 1996.

For Pretre and David Friedberg – the company’s chairman, and also the founder of Climate Corp. – the goal is getting people to drive less, and targeting those who already drive infrequently. The sweet spot is with a customer who drives 10,000 miles or under per year. These drivers tend to be city dwellers, who rely more on public transportation and bicycles to get around. “The audience we are going for is looking for tradeoffs,” says Pretre. “We want to give them incentives to drive less.”

The average San Franciscan drives about 4,000 miles per year, the company says, compared to the average Californian in general, who drives about 15,000 miles per year. The company plans to launch in San Francisco within the next few months, Pretre says.

With the data from the device, the driver can also go on the company’s Web site and view analytics where he can scrutinize his driving habits. There, he can see how much he’s driven and set a target goal for a new maximum amount of miles he’ll drive next month. As he approaches that number, he gets a notification. As the company develops the software more, MetroMile said it would like to also let the program do things like compare your driving habits to that of other drivers.

There are other devices, like GreenRoad, that allow customers to evaluate their driving habits. But those devices are used primarily for fleet management and testing driver performance by companies like FedEx. MetroMile, Friedman says, is the first consumer car data company.

So why is the company launching in Oregon (with a focus on Portland) and not in the San Francisco Bay Area, where MetroMile is based? A main component is insurance regulation. Oregon’s insurance regulatory body has an innovative products program that more easily allows for experiments like this. States with traditionally stringent insurance measures are California, New York, and Florida. But the company is hopeful about pushing the product through in California because of a pro-pay per mile bill that passed in the state assembly in 2009, backed by then-state insurance commissioner Steve Poizner.

It would likely be tough for a self-proclaimed “data science company” to navigate the red tape of insurance regulation, but Pretre incidentally has a lot of experience in the area. Though he considers himself a startup guy, many of the companies he’s worked with have had a major insurance component. One startup looked at insurance risk from earthquakes and hurricanes, and one dealt with selling cell phone insurance.

With such a radical new model, the traditional insurance companies are bound to push back. But one thing MetroMile doesn’t have to worry about, the founders say, is the traditional companies undercutting them by providing the same service: a pay per mile program would cannibalize their program, in which high mileage drivers subsidize the low mileage ones.

The company has a lot of work to do if it wants to make pay per mile truly ubiquitous: one state down, 49 more to go. But the states seem friendly to the idea, unlike their reaction to Uber. And that company still managed to score a regulatory win yesterday. MetroMile won’t topple the traditional insurance companies. But it might find a niche, and at the very least, get a few cars off the road for longer periods of time. And for a startup that spun out of a company called Climate Corp., that’s got to be some type of victory.